RBI extends the Interest Subvention Scheme for MSME Loans for FY 2020-2021

The Reserve Bank of India (RBI) has issued a notification extending the validity of the ‘Interest Subvention Scheme for MSMEs 2018’ till 31^st March 2021. This notification was issued on 7^th October 2020.

The scheme provides an interest relief of 2% per annum to eligible MSMEs on their outstanding fresh/incremental term loan/working capital during the period of its validity.

The coverage of the Scheme is limited to all term loans/working capital to the extent of ₹100 lakh.

However, on the date of filing claim, the loan accounts must not have been declared as Non-Performing Assets (NPA). The notification categorically states that interest subvention shall be inadmissible for any period during which the account remains NPA.

The key modifications contemplated by this notification are as follows:

• The Government has included Co-operative Banks as Eligible Lending Institutions from 3^rd March 2020. It may be recalled that the Central Government had announced this scheme on 2^nd November 2020 for Schedule Banks. It has now widened its ambit to include co-operative banks as well.

• The validity of the scheme has been extended until March 31, 2021. Therefore, fresh or incremental term loan/working capital limit extended by co-operative banks with effect from 3rd March 2020 will be eligible for coverage under the scheme.

• Acceptance of claims in multiple lots for a given half-year by eligible institutions is permitted.

• The requirement of Udyog Aadhaar Number (UAN) is done away with for units eligible for GST.

Units not required to obtain GST can either submit Income Tax Permanent Account Number (PAN) or they can get their loan accounts categorized as MSME by the concerned bank.

• Trading activities have also been allowed to be covered under the scheme without UAN.

The nodal offices of eligible lending institutions are required to submit their half-yearly claims to Small Industries Development Bank of India (SIDBI). These claims must be submitted in the formats prescribed in this notification and as per the guidelines for claim submission provided in the scheme.